Recover better: Consumers want green energy post-Covid
Look for a silver lining of the Covid-19 pandemic, and someone will point to the drop in emissions caused by lockdowns. How can governments ensure that this positive news survives the recovery?
Consumers around the world want their governments to pivot towards greener energy policies in their responses to the Covid-19 crisis, according to new research by ING. It is a view that is shared by survey respondents in all regions, but consumers in the Asia-Pacific region – which is sometimes thought of as being behind the curve on the climate change agenda – feel particularly strongly.
“The market left to its own devices may fall back on what’s cheapest and most efficient in the short term.”
Overall, 71% of consumers in the survey believe governments should require companies they are supporting financially to contribute towards achieving climate change targets, and 66% think plans for economic recovery should focus on accelerating the shift to a low-carbon future. And 70% want more policies that support sectors such as offshore wind, electric vehicles and other low-carbon emitting industries.
In China and India, these numbers are significantly higher. For example, 81% of Chinese consumers and 80% of Indian consumers say that their governments need to caveat any financial support. There may be concern globally about these countries’ ability to reduce their dependence on carbon-intensive energy systems, but it is what their populations want.
Don’t waste the gains
Governments will have to respond. For many consumers, a rare silver lining of the Covid-19 crisis has been the fall in greenhouse gas emissions seen as economies went into lockdown. The International Energy Agency expects CO2 emissions to be 8% lower this year than in 2019.
But Stephen Hibbert, ING’s Global Lead Energy Transition for the energy sector, says that without active interventions from policymakers this will be a blip rather than a turning point. “We have seen a snapshot of the future,” he says. “A more sustainable world with fewer carbon emissions, but we know it's not going to stay this way because economies have to grow again. Without strong steers, incentives, conditionality of support, or other policy instruments, the market left to its own devices may fall back on what is cheapest and most efficient in the short term, even if that risks missing long-term environmental targets.”
Right now, what looks cheapest and most efficient is the status quo. Oil prices remain at historically low levels, with demand depressed by slower economic growth, which gives industrial consumers little incentive to explore alternative resources. And electricity prices have been unusually volatile, which may discourage energy providers from investing in renewable energy – because the pay-offs now look uncertain.
A new status quo
This leaves governments with one option: change the status quo. That might mean devising fiscal policy that reduces the relative attractiveness of carbon-intensive resources and raising taxes on fossil fuels. Such interventions may be tempting for governments seeking to take control of their public finances after borrowing heavily during the pandemic.
However, there also needs to be a positive policy response that actively incentivises and supports investment in green energy and renewables. Hibbert points to the EU’s Green Deal, which is a set of legislation focused on infrastructure and industry with the aim of ensuring the EU is carbon neutral by 2050. “If the EU is serious about massive investment in infrastructure, energy system integrity and digitalisation,” he says, “that will help tackle some of the problems that have made renewables a less attractive area for expansion.”
The EU cannot do it alone. Other governments – in Asia-Pacific, where as we have seen, consumer opinion is now hardening, and North America, will also need to follow suit to achieve global climate targets. ING’s research suggests that governments will find they have popular support.
Covid-19, in this sense, must be a catalyst for more green energy rather than an obstacle to further progress. There will be practical hurdles. The pandemic has led to the postponement of the next United Nations climate change summit, for instance, which had been due to take place in Glasgow in November. That should not deter governments from pursuing the broader agenda of a green recovery – after all, the data shows that citizens are on board.